2002 (10) TMI 139 - AT - Central Excise

Assessable Value Nexus: Tribunal Emphasizes Credible Connection Between Advances and Sale Prices

The Tribunal emphasized the importance of establishing a credible nexus between advances and sale prices in determining the assessable value of goods. ... Valuation (Central Excise) - Strictures against Department Issues:1. Inclusion of notional interest in assessable value of goods.2. Nexus between advances taken and sale price of goods.Analysis:1. The first issue revolves around the inclusion of notional interest in the assessable value of goods. The Commissioner held that notional interest on advances taken by the appellant towards the price of goods must be included in the assessable value. The appellant argued that the advances were taken to safeguard against order cancellations, not to reduce interest liability. The Commissioner dismissed this argument, citing that the same objective could have been achieved through a bank guarantee. Despite the appellant citing multiple court and tribunal orders, including a Supreme Court judgment, the Commissioner declined to follow, stating that those cases involved comparative prices, unlike the tailor-made goods in this case. The Tribunal emphasized that if the department can prove that advances influenced the price reduction, notional interest can be included. However, in cases of tailor-made goods, establishing this nexus can be challenging, as seen in the ratio of Grasim Industries Ltd. v. CCE.2. The second issue concerns the nexus between advances taken and the sale price of goods. The Tribunal highlighted that in cases of goods readily available on the shelf, verifying this nexus is easier by comparing prices. However, for tailor-made goods, establishing this connection is more complex. Despite the Supreme Court judgments, tribunal decisions, and a circular from the Board emphasizing the department's responsibility to prove the nexus, the Commissioner still passed the order to include notional interest. This lack of adherence to legal precedents and circulars leads to unnecessary litigation, wastage of time, and resources. Consequently, the Tribunal allowed the appeals and set aside the impugned order, emphasizing the importance of establishing a credible nexus between advances and sale prices in determining the assessable value of goods.